People walk to work in Gwanghwamun, Seoul, on the morning of Feb. 13, 2024./Yonhap News

A recent study shows that South Korean workers now receive higher average wages than their Japanese counterparts. While Japan has experienced minimal wage growth due to decades of economic stagnation, Korea has enjoyed significant wage increases in large corporations over the past 20 years. This has led to a marked acceleration in wage growth in Korea compared to Japan. The study also highlights that the wage disparity between large and small companies in Korea has widened over the last two decades, whereas this gap has lessened in Japan.

A report by the Korea Enterprises Federation (KEF), released on Mar. 17, delved into an international comparison of wage trends in Korea and Japan, focusing on commercial employees (those in companies with ten or more employees). It compared the monthly wages from 2002 and 2022 in both countries. According to the report, Korean wages surged from 1.78 million won ($1,350) in 2002 to 3.98 million won ($3,000) in 2022, while Japanese wages saw a slight decrease from 3.84 million won ($2,892) to 3.79 million won ($2,845) during the same timeframe. Consequently, Korean corporate wages have surpassed those in Japan by 2022.

The disparity between Korean and Japanese wages expanded further in 2022, with Korean wages reaching a purchasing power parity (PPP) rate of $4,933 (6.57 million won) and Japanese wages at $4,061 (5.4 million won), adjusted for the inflation rates in both countries.

In terms of company size, Japanese companies initially led in both large and small sectors in 2002, but by 2022, the situation had reversed. Over these 20 years, wages in large Korean companies increased by 157.6%, while they decreased by 6.8% in Japan. Small and medium-sized enterprises (SMEs) in Korea saw a 111.4% wage increase, as opposed to a 7% increase in Japan.

The wage gap between large and small companies in Korea has become more pronounced. Using a scale where 100 represents the wages in large companies, the ratio of SME wages to large company wages expanded from 70.4 in 2002 to 57.7 in 2022 in Korea. During the same period, it narrowed from 64.2 to 73.7 in Japan, indicating a relative increase in SME wages in Japan compared to large companies.

The KEF stated, “In contrast to Japan, the widening wage gap in Korea, driven by significant wage increases in large companies, is leading to social conflicts. To address these challenges, we recommend that large companies with high wages exercise restraint in raising wages further. Instead, their focus should shift towards creating employment opportunities for young people and improving the operational environment for small and medium-sized suppliers.”